The name is derived from "The site of the Abbey" and relates to the short-lived presence of a house of Cistercian monks in the reign of Henry II. One tradition sites the monks' house just below the junction of the Marshaw Wyre and the Tarnbrook Wyre, on the north side of the reservoir. Another places it around the site of the primary school.

There are a number of notable buildings in the Abbeystead area: Cawthorne's Endowed School, founded 1674, rebuilt on its original site in 1877; Home Farm opposite, dated at 1891;Abbeystead House, built in 1886 for the 4th Earl of Sefton, Stoops Bridge Cottage, built in 1674 to house the schoolmaster, rebuilt in 1841, and the attached schoolroom, which now houses the Abbeystead Estate Office, which housed the school from 1841 to 1877. Records trace the chapel to the west of Abbeystead back to the 14th century. The church was rebuilt in 1733, with a spire and new chancel added during restoration in 1894.

The Abbeystead Reservoir was built in 1855 by Lancaster Corporation to supply mills lower down the River Wyre in the dry season. Although the reservoir is no longer in service it still features an attractive curved overflow weir visible from the footpath.

On 23 May 1984, 44 people were attending a presentation at a valve house at the outfall end of the Lune/Wyre Transfer Scheme in Abbeystead intended to explain the effects of the scheme on winter flooding in the lower Wyre Valley. During the presentation, water was pumped over the weir designed to regulate the flow of water into the River Wyre. During the presentation there was an explosion that killed 16 visitors, injured 22 more and severely damaged the valve house.